The bill, S.B. No. 1891, amends the Water Code to establish new guidelines for determining test years used for ratemaking purposes by water and sewer utilities classified as Class A, B, C, or D. It introduces Section 13.1831, which mandates that regulatory authorities set rates based on a test year selected by the utility that can include historic, future, or a combination of both types of data. The test year must begin on the first day of a calendar or fiscal year quarter and span a consecutive 12-month period that starts no later than 18 months after the utility files a statement of intent to change rates and ends no earlier than 18 months before that filing date.

Additionally, the bill modifies existing sections of the Water Code to clarify that rates must be based on test year information, ensuring that utilities have a reasonable opportunity to earn a fair return on their invested capital while preserving their financial integrity. It allows for the inclusion of construction work in progress in the rate base under specific conditions and repeals a previous definition in Section 13.002(22). The changes will only apply to rate proceedings that commence on or after the effective date of the Act, which is set for September 1, 2025.

Statutes affected:
Introduced: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)